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Ask the Wharton Experts
Wharton's entrepreneurial alumni and faculty answer questions affecting your business
Given
the dotcom fallout and the current state of the economy, what financial
resources would you recommend an entrepreneur pursue to fund his/her venture?"
—
D.L.
At
each stage of the economic cycle financing is available for different
types of business ventures. Many students graduated looking to make their
fortunes in dotcoms, only to discover that these types of ventures can
no longer be financed as a result of the dotcom fallout. Although it is
admirable to stick with a business model when capital is no longer available,
waiting for the economic cycle to turn, it is not necessarily wise. Consider
changing your business model to businesses for which financing may still
be available and consider partnering with persons who have had a prior
success in that business. Avoid early stage ventures for which financing
is almost impossible unless you have teamed with an entrepreneur with
a proven track record. In the current business cycle, financing is available
for businesses which take advantage of bankruptcies, for businesses which
are counter-cyclical and for selected industries (e.g. real estate) and
geographic regions (e.g. Asia).
— Frederick D. Lipman, Esq., author, "The Complete Going Public
Handbook;" instructor, Wharton Entrepreneurial Programs
Why
should I bring a product to market if I'm just going to be knocked off
anyway? What kind of preemptive strategies can I execute in order to protect
my ideas?
—
M.D.
First
of all, it's important to understand that you're most likely not going
to get knocked-off unless your product has already enjoyed a decent amount
of success. Knock-off 'artists' (primarily larger companies who specialize
in copying existing products...E&B Giftware is a good example) will
let the entrepreneur prove that demand exists for their product before
making the investment to bring a knock-off to market. However, if you're
a small company with a hot product and limited cash resources, there's
a pretty good chance that somebody will make an attempt to knock you off.
So why should you bring a product to market? Well...for one, it's the
experience of bringing something to market that entrepreneurs should really
be focusing on. Entrepreneurs tend to put a lot of emphasis on how much
money that can potentially make and that's good...business is about making
money. But entrepreneurs should be looking at their endeavors from more
of an experience perspective. They should be bringing their product to
market because of what they'll learn, not only from a business perspective,
but also from a personal perspective. The more experiences the entrepreneur
has, the more they learn and the more value they bring to themselves.
As far as preemptive strategies, there are a number of good ones you can
tray to follow. Before embarking on any preemptive strategy, the entrepreneur
needs to have a good understanding of how much cash, time and effort each
strategy will require. One of the preemptive strategies that we developed/executed
with MouseDriver was to give the customer an emotional tie to the product.
We knew that we would get knocked off and wanted to make sure that people
had an emotional connection to our product so that they would be more
inclined to purchase not because they thought we had the best or cheapest
product on the market, but because they knew the story behind the product.
In business speak, this is called 'branding' and is typically very hard
to do. But for those who can execute a phenomenal branding campaign (keep
in mind that you have to have a quality service or product first) there
is no better preemptive strategy...unless you can find a way of totally
blocking out competitors.
— John Lusk, author, "The MouseDriver Chronicles"; Wharton
MBA alumnus
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